Last November, I announced my intention to create a portfolio of 10 companies that investors had effectively thrown away and given up on, in the hope of showing that deep-value investing, and contrarian thinking, can actually be a very successful investing method. I dubbed this the “One Person’s Trash Is Another Person’s Treasure” portfolio and, over a 10-week span, I highlighted companies that I thought fit this bill, and would expect to drastically outperform the benchmark S&P 500 over the coming 12 months. If you’re interested in the reasoning behind why I chose these companies, then I encourage you to review my synopsis of each portfolio selection:
Exelon
QLogic
Dendreon
Dell
Staples
Arkansas Best
Arch Coal
Skullcandy
France Telecom
Xerox
Now, let’s get to the portfolio and see how it fared this week:
Company | Cost Basis | Shares | Total Value | Return |
---|---|---|---|---|
Exelon | $31.25 | 31.68 | $993.17 | 0.3% |
QLogic | $11.46 | 86.39 | $818.11 | (17.4%) |
Dendreon | $5.97 | 165.82 | $664.94 | (32.8%) |
Dell | $13.37 | 74.05 | $996.71 | 0.7% |
Staples | $13.48 | 73.44 | $1,151.54 | 16.3% |
Arkansas Best | $10.83 | 91.41 | $1,766.96 | 78.5% |
Arch Coal | $7.03 | 140.83 | $508.40 | (48.6%) |
Skullcandy | $6.71 | 147.54 | $774.59 | (21.8%) |
France Telecom | $11.64 | 85.05 | $818.18 | (17.4%) |
Xerox | $8.16 | 121.32 | $1,085.81 | 9.7% |
Cash | $0.06 | |||
Dividends receivable | $77.55 | |||
Total commission | ($100.00) | |||
Original investment | $10,000.00 | |||
S&P 500 performance | 6.7% | |||
Performance relative to S&P 500 | (10.1%) |
This week’s winner
Thanks to concerns about a potential credit crunch in China, and the somewhat imminent paring back of QE3 by the Federal Reserve, it wasn’t easy to find a gainer last week. Taking the top honors was electric utility Exelon Corporation (NYSE:EXC) with a paltry 2.2% gain on the week. Despite no company-specific news, the reasoning behind the move higher is pretty easy to understand. Exelon Corporation (NYSE:EXC) is a necessity stock in that supplies energy, which will remain in fairly steady demand regardless of whether or not we dip back into another recession. With somewhat predictable cash flow, it’s a wonderful safety net for investors to turn to in times of uncertainty.
This week’s loser
Conversely, with China’s Shanghai Composite swooning as much as 15% in a span of five days, commodity stocks absolutely took it on the chin. For the third-straight week, Arch Coal Inc (NYSE:ACI) was the worst performer, shedding another 12.6%, and is now down nearly 50% from late January. The thesis here is that, if China’s growth slows because loans aren’t available, then demand for coal and other materials will fall. Arch Coal Inc (NYSE:ACI)’s growth plan entailed forging export deals to China and Southeast Asia, so China’s slowing growth is certainly a concern.